Stocks Close Mostly Lower But Well Off Worst Levels - U.S. Commentary

4/3/2012 4:22 PM ET

Stocks moved mostly lower over the course of the trading day on Tuesday, with considerable selling pressure emerging in afternoon trading following the release of the minutes of the Federal Reserve's latest monetary policy meeting.

The major averages climbed well off their worst levels going into the close but still ended the day in the red. The Dow fell 64.94 points or 0.5 percent to 13,199.55, the Nasdaq edged down 6.13 points or 0.2 percent to 3,113.57 and the S&P 500 slid 5.73 points or 0.4 percent to 1,413.31.

The pullback seen in afternoon trading came as the minutes of the Fed's March meeting seemed to indicate that the members were less willing to initiate another round of quantitative easing amid signs of improvement in the U.S. economy.

The latest minutes said only "a couple of members" indicated that additional stimulus could become necessary, compared to the minutes of the January meeting, which said "a few members" believed that conditions could warrant additional securities purchases.

Paul Ashworth, Chief U.S. Economist at Capital Economics, said, "Even though Fed officials remain cautious about the economic outlook, there is little, if any, support for any new program of asset purchases in the short term."

"So there will be no QE3 unless the recovery falters and, even under those circumstances, it is still questionable whether there would be a majority in favor of more action," he added.

Earlier in the day, the Commerce Department released a report showing that factory orders rebounded by slightly less than expected in the month of February.

The report showed that new orders for manufactured goods rose by 1.3 percent in February following a 1.1 percent drop in January. Economists had expected orders to increase by about 1.5 percent.

Traders also digested the release of monthly sales results from the nation's major auto manufacturers, with sales rising due in part to increased demand for smaller cars amid the recent surge in gas prices.

Chrysler reported a 34 percent jump in auto sales in March, while General Motors (GM) said its sales rose by 12 percent and Ford (F) said its sales increased by 5 percent.

Meanwhile, Molson Coors Brewing (TAP) fell by 5.4 percent after the company announced an agreement to acquire European brewer StarBev for approximately $3.5 billion.

Sector News

While most of the major sectors ended the session well off their worst levels of the day, significant weakness remained visible among gold stocks. The NYSE Arca Gold Bugs Index tumbled by 3.3 percent after closing higher in each of the three previous sessions.

The weakness among gold stocks came amid a notable decrease by the price of the precious metal. Gold for June delivery closed down $7.70 at $1,672 an ounce and accelerated to the downside in electronic trading, plummeting by more than $25 an ounce.

Semiconductor stocks also saw considerable weakness, resulting in a 1.6 percent drop by the Philadelphia Semiconductor Index. STMicroelectronics (STM) and Advanced Micro Devices (AMD) turned in two of the sector's worst performances.

Networking, steel, and oil stocks also ended the day firmly in the red, with oil stocks moving lower along with the price of crude oil. Crude for May delivery slid $1.22 to $104.01 a barrel.

Meanwhile, oil-sensitive airline stocks benefited from the drop in oil prices, driving the NYSE Arca Airline Index up by 1.2 percent. Biotech and healthcare stocks also saw some strength on the day.

Meanwhile, the major European markets turned lower over the course of the trading day. While the U.K.'s FTSE 100 Index fell by 0.6 percent, the German DAX Index and the French CAC 40 Index tumbled by 1.1 percent and 1.6 percent, respectively.

In the bond market, treasuries moved sharply lower on the heels of the release of the Fed minutes. As a result, the yield on the benchmark ten-year note, which moves opposite of its price, jumped 9.1 basis points to 2.284 percent.

Looking Ahead

Economic data is likely to attract some attention on Wednesday, with traders likely to keep an eye on reports on private sector employment and service sector activity.